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The Actuary The magazine of the Institute & Faculty of Actuaries

Back to the future

he science that we now call actuarial science has a proud history in Scotland. In 1742, the first pension fund founded on scientific lines was to provide benefits to the widows and children of ministers in the Church of Scotland. The setting up of ‘the Fund’ on sound financial principles was ahead of its time. In 1748, there was published ‘The Rise and Progress of the Fund’, which must rank as the first ‘actuarial report’ published anywhere in the world. The mathematical work done in establishing the Fund became known throughout the UK by means of the book Observations on Reversionary Payments published in 1771 (written by Dr Richard Price). This became a standard work on life insurance.
During the 19th century, a thriving life insurance industry was founded in Scotland. The Scottish Widows was founded in 1815, the Standard Life in 1825, the Scottish Amicable in 1826, the Scottish Provident in 1837, the Scottish Life in 1881, and the Scottish Mutual in 1883. The importance of life insurance to the Scottish economy cannot be overemphasised. These life offices transacted business throughout the whole of the UK and were major employers.
In 1833 the Association of Managers of Life Offices in Scotland was founded. In 1841, it became the Associated Scottish Life Offices, being the first life insurance trade association anywhere in the world.

The founding of the Faculty
In 1856 the Faculty of Actuaries in Scotland was established in response to a growing demand from the life insurance industry for trained professionals. In 1858 it had only 38 fellows, and it celebrates its sesquicentenary this year with some 1,300.
Textbooks were written and papers were published in the Transactions of the Actuarial Society of Edinburgh, and (from 1904) in the Transactions of the Faculty, and (from 1995) in the British Actuarial Journal. From the outset, until joint examinations with the Institute were established in 1994, the Faculty had its own professional examinations. The passing of these examinations was the only way to become a fellow of the Faculty of Actuaries.
From as early as 1843, life offices throughout the UK had established the principle of pooling their mortality statistics. Life tables based on pooled life office experience were published, and this was formalised in 1931 by the setting up of the Continuous Mortality Investigation Committee of the Institute and Faculty.
Actuaries have been closely involved in the investment of their companies’ life funds. As a collaborative effort between the Financial Times and the actuarial profession, the FT-Actuaries share indices were created over 40 years ago (in 1962) to cover the UK equity market.

The Faculty and Institute have recognised the need for its members to keep up to date with current thought and practice in the areas in which they operate and a formal continuing professional development scheme was adopted in 1992. The Faculty and Institute together publish a range of official guidance notes to help the actuary carry out his or her professional duties, the first of which was issued in 1976. The number of these notes has expanded considerably in recent years, and the total is now in excess of 45. Because of the important statutory role played by appointed actuaries and pension scheme actuaries, a scheme of certification (a practising certificate) was established for appointed actuaries in 1992 and for pension scheme actuaries in 1997.
The Faculty has played its part in international and European actuarial organisations, such as the International Actuarial Association (IAA) and the Groupe Consultatif. The world Actuarial Congress was held in London and Edinburgh in 1964, and in 2006, the Groupe Consultatif Colloquium and the meetings of the IAA will be held in Edinburgh.

Storms and criticisms
The past few years have brought an unprecedented level of change and not a few storms and criticisms of the actuarial profession. We have had the Equitable saga, the Morris Review, and the ‘pensions crisis’. The setting of actuarial standards will now be formalised under an independent Actuarial Standards Board reporting to the Financial Reporting Council. Close attention is being paid to these matters and it is hoped that the profession will emerge stronger having undergone a critical examination. Meanwhile, this year, we celebrate the 150th anniversary of the Faculty and look forward with confidence to the bicentenary in 50 years’ time.